Golf course lease approved
It took two votes at the Whitefish City
Council’s Dec. 6 meeting to get a long-term lease approved for city
land used by the Whitefish Lake Golf Club.
Following a public hearing in which one
speaker questioned whether the city was getting enough money from
the golf association, a proposed lease negotiated by City Manager
Chuck Stearns and golf association board members Terry Nelson and
Paul Johannsen failed to be approved by a 3-2 vote. Councilors John
Muhlfeld and Ryan Friel were in support.
But at the end of the meeting, when the
councilors typically raise new topics or discuss their votes,
councilor Turner Askew said he was “disturbed” by his vote and
motioned to reconsider the vote.
As it turned out, while the councilors
unanimously voted to reconsider the vote, Askew was the only one
who changed his vote. The proposed contract was approved by 3-2,
with councilors Chris Hyatt and Phil Mitchell in opposition.
The Whitefish Lake Golf Club has
operated the Whitefish Municipal Golf Course since the 1940s. The
current 20-year lease would expire in 2018, but the golf
association has plans to build a $750,000-plus maintenance facility
and wants a long-term lease to assist in lining up financing for
the project.
As negotiated, the new contract calls
for increasing the base pay to the city from $17,000 to $22,375,
adjusted every five years for inflation, in addition to 3 percent
of the net profit. The lease would be for 30 years with a 20-year
renewal option.
While several councilors had their
doubts ahead of time about the proposed contract, points raised by
Michael Collins during the public hearing may have influenced the
first vote.
Using the golf association’s last
available audited financial statement, from 2008, and using
accepted financial practices, Collins concluded that the city
should collect from $200,000 to $300,000 a year.
Basing the lease on 4 percent of the
land value and the value of the 180 acres of land at $50,000 per
acre, Collins said the city could expect to collect $360,000. He
noted that Whitefish Mountain Resort pays 3 percent of the raw land
value of Big Mountain to the U.S. Forest Service, and shopping
centers could expect to pay 10-15 percent of their land value.
A lease also could be based on gross
revenues, Collins said. The golf association reported in its 2008
audit taking in about $1.6 million in green fees, memberships and
storage or trail fees, another $2.2 million in clubhouse revenue
and $863,943 in golf shop revenue. A lease rate of 6 percent based
on $4.7 million in total revenue would provide the city with
$286,000 per year, he said.
Collins noted that about 0.43 percent
of the golf association’s gross revenue goes to the city lease,
0.27 percent to state income tax and 1.12 percent to federal income
tax. Lowering the depreciation rate, which Collins characterized as
“high,” from $435,000 to $300,000 would free up $130,000 for a
higher payment to the city, he said.
“In summary, there appears to be
significant cash flow to accommodate a city lease payment in the
range of $209,000 to $340,000,” Collins said.
The city has a fiduciary responsibility
to insure it gets a fair value for all city-owned assets, he said.
In addition to providing audited financial statements for 2009 and
2010 and appointing a citizen committee to draft a new lease,
Collins called for annual independent audits and limiting the terms
of the lease to 10 years.
Both Nelson and Johannsen, along with
mayor Mike Jenson, responded to Collins’ numbers and calculations.
Among the many points raised:
• The city has never invested any money
in the golf course, and it failed in the past to manage the
facility.
• The city doesn’t own all the
land.
• The golf course draws large numbers
of tourists, who spend money in town and pay resort taxes.
• Golf course crews maintain the city
cemetery and nearby soccer fields.
• The city and the golf association
jointly hold water rights used at the golf course, which are facing
adjudication.
• Other public facilities owned by the
city, including the O’Shaughnessy Cultural Arts Center, Stumptown
Ice Den, The Wave and the Whitefish Library, are not treated as
revenue sources for city government.
“We’re being penny wise and pound
foolish about this,” Askew said about changing his vote. “I made a
mistake.”
Mitchell, who worked for years building
golf courses and was once president of the Whitefish Lake Golf
Club, proposed amending the contract to eliminate the percentage
take of the net profit, raising the base pay to $30,000 and
requiring annual financial audits.
Hyatt wanted similar amendments, but
when Jenson pointed out that the council can’t amend a contract
proposal, and after Nelson and Johannsen said they wouldn’t accept
the amendments, Hyatt’s motion to table a vote on the lease died
for lack of a second.